IRCTC Shares Fall Nearly 40% from 52-Week High: Here’s What’s Behind the Slump

Shares of Indian Railway Catering and Tourism Corporation (IRCTC) have dropped 38% from their 52-week high of ₹1,139, which was touched on May 23, 2024. The stock reached its 52-week low of ₹705.20 on February 25. Despite being a monopoly player in online train ticket booking and railway catering services, the stock has underperformed in the NIFTY NEXT50 index, which corrected 13.19% during the same period.

### Revenue and Market Dynamics

IRCTC earns its maximum revenue from online ticket booking, charging a convenience fee from travelers. For air-conditioned (AC) trains, the convenience fee is ₹30 when booking via online banking and ₹20 if booking through UPI. However, more than 95% of passengers travel in non-AC classes, according to a report by the Press Trust of India. To increase its revenue, IRCTC is dependent on the railways to hike the number of AC trains.

Meanwhile, domestic air travel is growing rapidly, with government initiatives like Ude Desh Ka Aam Naagrik (UDAAN) making air travel affordable and accessible to Tier-II Indian cities. Domestic air passenger traffic rose by 6.12% in 2024 to 161.33 million from 152 million in 2023, according to data from the Directorate General of Civil Aviation (DGCA).

### Historical Performance and Recent Decline

IRCTC shares provided multi-fold returns to investors from 2019 to 2021, with the stock’s price-to-earnings (P/E) ratio jumping from 43 times in 2019 to 320 times in 2021. However, the stock has been witnessing a price correction since 2021 after reports emerged about the government’s plan to appoint a regulator for the rail sector. Indian Railways had reportedly asked IRCTC to share 50% of its convenience fee revenue with the railways. This news led to a sharp decline in IRCTC’s stock price, with the counter declining almost 40% from its all-time high of ₹6,393 per share touched on October 19, 2021.

### Financial Performance

In the December 2024 quarter, IRCTC reported a net profit of ₹341 crore, up 14% from ₹300 crore in the same period last year. Its revenue from operations advanced 10% to ₹1,225 crore from ₹1,115 crore in the year-ago period.

During the post-earnings conference call, the management attributed strong sequential revenue growth to an uptick in tourism and catering businesses. However, revenue from the internet ticketing segment declined by 5% sequentially. On the margins front, the overall EBIT margin dipped by 90 basis points (bps) quarter-on-quarter (QoQ) due to a decline in catering margins despite good growth in segmental revenue. However, internet ticketing margins improved by 370 bps QoQ at 84% due to an increase in non-convenience fees despite reaching a saturation point.

### Conclusion

The decline in IRCTC shares can be attributed to several factors, including the government’s regulatory plans, dependency on AC train bookings for revenue, and the rapid growth of domestic air travel. Despite these challenges, IRCTC continues to report strong financial performance, driven by its monopoly in online ticket booking and catering services.